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This has let the companies pile cash into their war chests (see table). They will need
them. All four grew up when computing was basically something done at a desk or
on a laptop with the programs you had to hand. Now, as in Mr Martins realm of
Westeros, where the reader is always being apocalyptically assured that winter is
coming, their world is undergoing great change.
The iron phone
As the web becomes something that lives through and on the phone, and software
something handled in a cloud, the clear lines that once defined territories and
strategies are blurring. A mixture of threat and opportunity has the big four using
their cash and acumen to strike out into other areassometimes into uninhabited
lands, sometimes into places where some other firm is used to ruling the roost. And
they are not the only ones involved in the fray.
A host of start-up lordlingssuch as Twitter in microblogging, or Square in mobile
paymentsseeks to carve out fiefs of their own, either with an eye to being bought
out by the big four or becoming powers in their own right. And there is an ancient
empire to contend with, too: Microsoft, which recently launched its first tablet
computer, is trying hard to get back into the game, having been profitably
preoccupied with PC software. But it is the battle between the big four that will have
the greatest impact in future on the way people find information, consume content
and purchase all kinds of stuff, and on who takes their money in return.
The battlefields on which the big four are fighting are, like most battlefields, messy
and confusing. They are also numerous. Apple and Google are crossing swords in
operating systems for smartphones and tablet computers; both firms and Amazon
are butting heads in hardware; Google and Facebook have become sworn enemies
in social networking; some of the other protagonists even have designs on ecommerce, which has long been Amazons stronghold.
They also have territories to defend. Take Google. Its search engine gives it a rich
heartland. The company continues to pour money into refining the algorithms that
power this engine. It has reinforced its defences by annexing other services that
help find things, for instance by buying ITA Software, a firm that provides flight data
and other travel information.
kitchenware and everything else. But last year 37% of Amazons $48 billion revenue
still came from media, both physical and digital.
The most hard-fought battle between them so far has been in the e-book market.
Amazon accounted for some two-thirds of all digital-book downloads in America last
year. Apple accounted for just 5%, but it has been trying to woo publishers away
from Amazon with an aggressive strategy that gives them more freedom to
determine e-book prices than under Amazons terms. In digital music, the tables are
reversed, with Amazons Cloud Player music service struggling to make a dent in
iTunes huge market share. In video both firms are trying to make headway against
Netflix, which has been turning itself from a DVD renter to a video streamer.
Content-maesters
Facebook and Google have so far committed fewer assets to this campaign, though
both are aware of its importance. Facebooks strategy has been to give other firms
content a social spin. In some territories it has struck alliances with the likes of
Netflix and Spotify, a music streaming company, so its users can share what they
are listening to or watching on these services with their friends. Googles YouTube
business dominates the world of user-generated video, but the company has
struggled to develop a compelling alternative to both Amazons digital fare and
iTunes. In March it finally brought together its disparate offerings in music, e-books
and other areas as part of a new online store, dubbed Google Play, in an effort to
concentrate its forces. But Googles attempts to move into new territories are not
always as successful as Android has been. It has mounted various attacks on
Facebooks social stronghold, without notable success.
Among the things Google added to Play were the mobile apps formerly housed in its
Android market. The other titans have been hawking their own app selections, too.
This is crucial to the way they see their battles unfolding: as a fight between the
various platforms with which they seek to provide the best mobile experience.
Here there is a three-way fight between Apple, Amazon and Google, which have
each developed rival combinations of mobile gadgets, operating systems and app
stores. Apple, which first woke up to the power of such platforms when it combined
the iPod with iTunes, has the high ground. Its margins on iPhones are so good that
Asymco, a market-research firm, reckons the company accounted for 60% of the
total profits made by the mobile-phone industry in the third quarter of 2012, even
though it accounted for just 16% of phone shipments during that period.
But Apple now finds itself competing with rivals that have radically different ways of
making money. Amazon is flogging its Kindle e-readers and tablet computers, which
use a modified version of Android, at pretty much what it costs to produce and sell
them. Where Apple used iTunes to sell iPods, Amazon uses its tablets to sell
everything else in the world.
Stark realities
Googles platform plans are less clearly defined. To begin with it was happy for
Android phones and tablets all to be made by others, but in 2011 it decided to
splash out $12.5 billion on Motorola Mobility, a handset-maker among other things.
Google already markets its Google Nexus tablets, which are made by Asus and
Samsung. And it has recently begun selling cheap notebooks using not Android but
another of its operating systems, Chrome. Most analysts expect Google to churn out
relatively cheap devices in the hope that buyers will use them to access its search
and other services, thus seeing the ads on them.
And then there is the empire over the water. Microsoft, which in America is now
number two in search after Google, has a willing (and desperate) vassal in Nokia, a
phonemaker, and a new mobile operating system. Built into its recently launched
Surface tablet, this gives it a shiny new platform of its own. Like the Targaryen
family, which used to rule Westeros and now plots in exile to regain the crown, the
company is desperate to regain its former glory.
Facebook has so far stayed neutral in this. But it is not a bystander in the
competition to create the best possible digital shopping experience for consumers
another battle for which those platforms are being built. To win this one means
taking turf from Amazon. Facebook Gifts is a new service in America which mines
what the company knows about its users, their tastes and their friendships to
encourage them to buy and send each other gifts at appropriate times, such as
birthdays. To get it off the ground Facebook bought a gift-giving outfit called Karma
and forged partnerships with over 100 companies, including Starbucks and Lindt, a
chocolatier.
Google is experimenting with a service that would let folk find goods online, order
them and have them delivered within a day for a modest fee. This seems similar to
Amazons hugely successful Prime service, which costs $79 a year to join in
America. Rather than try to replicate the e-commerce giants extensive network of
warehouses, Google is looking for partnerships with shipping companies and
retailers instead. But if it is serious about taking on Amazon, it may ultimately have
to buy a logistics firm. At $69 billion UPS has a market value less than a third of
Googles; it is valued at less than twice the search giants cash pile.
Platforms are the weapons with which the warring factions seek to rule their own
lands and conquer new ones. Patents are the weapons with which they try
straightforwardly to hurt their rivals. Although some lawsuits have been launched
by trolls who accumulate patents without actually making stuff, a number have
been launched by one giant, or a company acting as its catspaw, against one of the
others. Apple has been lobbing lawsuits around in the smartphone arena as if armed
with a trebuchet. Google snapped up Motorola Mobility in large part to get its hands
on the firms thousands of patents issued and pending, thus bulking up its own
defences and accumulating ammunition to fling at the fortresses of the competition.
With the battlefields seeming to multiply every quartermobile wallets, cloud
computing and who knows what elsepicking out the strategic shifts over the
tactical setbacks is hard. Todays apparent failures may contain the seeds of future
victories. Google+, Googles latest attempt to lay siege to Facebook, has its flaws.
Apple was woefully under-prepared for its assault on Google Maps. But if Google
wants to progress in the social arena, and Apple in location-based services, they
have to make bold bets, and in both cases they have at least gained some sort of
beachhead. The challenge the firms face is to move beyond the initial
disappointment cannily enough to turn the openings into successes.
No one looks likely to win quickly. There will be a lot of trench warfare, predicts
Roelof Botha of Sequoia Capital, a venture investor. And that looks likely to be great
news for consumers, who will be able to choose from an ever wider range of
innovative and cheap (or free) technologies. Of course, as competition increases,
firms might be tempted to lock down their heartlands more tightlyor to use foul
means to attack those of others. This is bringing regulators out of their lairs. Youre
starting to see an empire-strikes-back moment amongst antitrust authorities, says
Adam Thierer, a researcher at George Mason University.
The Others
Watchdogs in Europe and America have been looking into accusations that Apple
has colluded with some publishers to break Amazons grip on e-books. And they
have been scrutinising Google too. Some companies, including ones with links to
Microsoft, have accused the search firm of unfairly promoting its own services, such
as Google+, in search results. They also claim that it uses content from competitors